A warm welcome to Aperam's Q1 podcast. My name is Sud Sivaji. I'm Aperam's CEO, and I hope you're having a good start to the day. Today, together with Nicolas Changeur, our Chief Financial Officer, we'll explain our first quarter performance, current trading, and give guidance. I will start as I concluded last quarter's call. We are building Aperam into a diversified high-value material player, that even when things are happening around the world that many of us did not expect even a quarter ago. The conflict around the Strait of Hormuz and the resulting energy shock has led to inflationary pressures and forced central banks, including the ECB, to postpone anticipated interest rate reductions. This has implications for the global economy, and this includes Aperam as well.
To make a long story short, while there is burden from higher energy prices in our Belgian operations, thanks to our diversified business chain, we are still confident that our good start into 2026 will continue into Q2, and we'll give details in this podcast. As is our standard practice, we'll host a conference call later today. It will take place at 2:00 P.M. CET. We look forward to addressing your questions then. The registration link for the call is available on our website and can also be found on the penultimate site of the podcast presentation. Aperam is providing the following information as part of its earnings release documentation. This material supports our quarterly financial reporting and where applicable, our disclosure of regulated information. Please take note of the disclaimer on page two.
Moving to page three, I'm pleased to share our results for the first quarter of 2026. To put it simply, Q1 was a really good quarter for Aperam. In fact, this represents our best start to a year in three years. While we have every reason to be proud of these figures, we are focused with quiet confidence to run businesses that structurally create shareholder value in every market we operate in, irrespective of the cycle. We are operating in a complex global environment. Our success this quarter is a testament to our resilience and our differentiated value chain. If you look at the data on the slide, the momentum is clear. Shipments reached 617 kilotons, 11% increase over Q4. This was largely driven by a healthy return of seasonality in Europe. Adjusted EBITDA rose to EUR 90 million, up 34%.
This was not just volume. It was supported by some positive valuation effect, but more importantly, a very disciplined approach to our cost base. Working capital increased by 10% compared to Q4. This is good news. We have to be ready for the increasing business in the second quarter, and our integrated value chain has helped compensate for one-third of what would have been a normal increase. We also saw a strong start to the sixth season of our Leadership Journey, contributing EUR 18 million this quarter. This is a promising start to deliver our EUR 150 million target by 2028. Of course, our progressive dividend policy allows us to distribute EUR 37 million in dividends to our shareholders. It is our promise that we want to remain a reliable dividend payer.
Moving on to the next slide to talk about our markets and some important topics that are probably on your minds. As many of you know, we've been listed on the stock exchange for 15 years now. Let me be very clear. The Aperam in 2026 is fundamentally different from the company that rang the opening bell in Amsterdam in January 2011. Back then, we were largely seen as a European stainless steel player. Today, that description is not just old-fashioned, it is even inaccurate. We have evolved into a global diversified value chain. The geopolitical instability we will face today would have crippled the Aperam of 15 years ago. Today, it is a variable we are built to manage. Please look at our segment performance on the right.
While we certainly have the European upside supported by higher seasonal volumes, we are no longer dependent on a single business and a single geography. Brazil is delivering results consistent with its seasonally weakest quarter. Our diversified yet interconnected value chain is our foundation. When stainless steel faces headwinds, our global footprint and our other segments provide support as they've done in the last years. Now, the other side of our value chain, which is the integration and synergies between the business, is multiplying as stainless steel shows green shoots in Europe. Our Alloys segment is showing progress across almost all fronts, except some ongoing weakness in oil and gas. The integration of Universal in the United States is fully on track. Look at the EBITDA per segment chart.
Stainless and Electrical Steel is strong at EUR 35 million, but it represents only one-third of the pie. The rest of Aperam's strength is distributed across the other three segments. We have created several pillars where every single segment is a meaningful contributor to the bottom line. The European business in Stainless Steel is indeed strengthening. Already in Q1, we are seeing the benefits of an upcoming trade defense environment. EU imports have decreased to 12%, reaching a sustainable post-safeguard run rate already. This gives us and the entire steel industry a fairer playing field in Europe. On the energy front, yes, indeed, volatility is costing us a high single-digit million euro amount per quarter this year. Look at the result. Despite that headwind, every segment is performing. Our integrated model allows us to absorb these energy shocks. The takeaway from the slide is simple.
We are succeeding in creating value in every market and across the cycle. Whether it is our leadership in recycling or our high-performance alloys, we are adding to the value we create from these new businesses. Now we await the upside of Stainless Europe as well. Let's dive deeper into the four segments. Nicolas, the floor is yours.
Bonjour to everyone. I have the pleasure to take you on a journey through our four business segments with the development in Q1 and the outlook for Q2. Let's start first with the Recycling & Renewables segment. Looking at the figures, Q1 EBITDA came in at EUR 23 million. While this is a 28% decrease quarter-on-quarter, it is relevant to put this in context. Q4 is always a seasonal quarter, which is bolstered by exceptionally strong end-of-year effects. On a year-on-year basis, we see a very positive trend driven by higher volumes and higher prices compared to Q1 2025. Within the scrap recycling market, we are seeing global demand for thinner scrap pricing, and we are finally seeing the destocking phase in aerospace alloys fading out. This is a significant positive for our high-value recycling streams. In the bioenergy business in Brazil, the news is equally positive.
We benefited from an absence of weather extremes, allowing for consistent planting and regular operations. Our joint venture integration is progressing steadily, and we remain committed to our 20% expansion target over the next five years. Looking ahead into the second quarter, the EBITDA outlook remains resilient. We expect to maintain the robust operational levels we saw in Q1. Underlying demand and pricing environment for scrap are strong enough to keep EBITDA steady. Furthermore, this segment has minimal energy exposure, allowing it to remain a stable contributor even when other industrial sectors are under pressure. Moving to the next slide. The figures of Stainless and Electrical segment speak for themselves. EBITDA for Q1 reached EUR 35 million. This is more than three times the results we reported in Q4. This jump was driven by higher prices and supported by positive valuation effects.
On a year-on-year basis, adjusted EBITDA rose due to a combination of improved pricing power and the three cost efficiency measures we have implemented across our plants, which are now paying off. If we look at our end markets, the picture is mixed. Construction remains the most challenged sector in Europe due to cost inflation and in Brazil due to seasonal impact. No signs of improvement are visible in this sector. Consumer goods. Demand in Europe remains adequate with a flat level for core appliances. Brazil marked a decrease driven by seasonality. Automotive and transport in Europe demand is steady, but manufacturers are under pressure. In Brazil, we see the effect from seasonal low. Food, health, and catering. Demand is flat and no indications of potential changes in the near future. Industry, energy, and chemical. This was a bright spot.
We are seeing increasing momentum in Europe and a moderate level in Brazil as industrial players prioritize local reliable supply chains. Crucially, regarding our energy needs, we have partially hedged our exposure and capped prices. This limits the impact to a high single-digit million euro amount per quarter for this year, as guided previously. Our outlook for the second quarter is very positive. We expect this momentum to continue for several reasons. Lower imports into Europe are driving higher capacity utilization and increased sales force. In Brazil, we anticipate a regular seasonal uplift. It is important to note that this growth is coming from supply-side dynamics as we do not see signs of an organic macro demand recovery. Our outlook is based on our focus of being efficient and reliable in a market with supply opportunities. Moving to the next slide, the Alloys & Specialties segment.
This segment proves our focus on return on capital employed. Our growth in this segment is a perfect balance of organic expansion and value accretive M&A. We focus here on high performance materials for the world's most demanding industries. The performance in Q1 was very encouraging. Adjusted EBITDA rose to EUR 27 million, a 23% increase quarter-on-quarter. What makes this particularly impressive is that we achieved this growth even while absorbing higher maintenance cost during the period. On a year-on-year basis, EBITDA remained almost flat, proving the consistency of this business despite the broader market turbulence. The market environment for alloys is showing clear signs of normalization. In our aerospace, we are seeing normal market development. While Boeing are stabilized, we are still waiting for a full recovery to historical levels. Interestingly, demand for engine components is still outpacing structural parts where we are present.
Energy and chemicals. LNG demand remains stable, and the order book is well stocked at high levels. This is a direct result of Europe's push for energy security. While the oil and gas sector remains slow, the chemical sector is holding steady, nevertheless, slightly below normal levels. Automotive and electronics. This is a highlight for the quarter. We are seeing strong demand in displays and magnetics. Our automotive components business shows the very first signs of a recovery. The increasing demand for electric vehicles supports us. Our outlook for Alloys & Specialties in Q2 is very positive. The stabilization we saw in Q1 suggests that the business is ideally positioned for a broader cyclical recovery as we move through the year. With a healthy order book in electronics and CD aerospace demand, we expect results to continue their upward move in the coming months.
The Alloys segment has seen no significant impact from increasing energy prices in its total cost structure, as there is a clear surcharge mechanism for such critical alloys, making it a highly stable contributor during this period of geopolitical instability. Moving to the next slide with the last segment, let's look at Services & Solutions. At the end of our integrated value chain, Services & Solutions is our direct connection with the market. It is also the segment that most competes with imports. While other independent distributors often rely on imports from outside the EU, our segments leverages our internal production to offer local, reliable, and sustainable solutions, a massive advantage in today's disrupted trade environment. The performance in Q1 has been very good. Adjusted EBITDA reached EUR 20 million, a 186% increase quarter-on-quarter.
This was significantly impacted by higher short-term demand and positive valuation effect as the market adjusted already for the new reality in 2026 based on the new EU regulation. The market environment for distribution remains complex. The import advantage. We are seeing a very positive effect from the general reduction in imports. As the chart shows, import volumes have dropped significantly compared to the peaks of 2020 and 2025. This has allowed us to stabilize our position and also to increase our capacity utilization in the Stainless & Electrical segment. Inventory levels. Interestingly, distributor stocks remain at low level. We see no signs of major restocking yet, which suggests that the current demand is real and not just inventory building. However, restocking will be necessary in the future. Pricing. Spot prices have escalated, driven by raw material increase.
This led to a significant positive valuation effect for our existing inventory this quarter. Energy resilience. Similar to our other downstream segment, here we have minimal energy exposure, ensuring that the current energy crisis has a very low impact on this segment. Looking ahead to the second quarter, our outlook is positive. We expect EBITDA to be even stronger than what we have seen in Q1. This will be supported by the continued pressure on imports, which favor our local service centers model. While we are not yet seeing a broad organic recovery in underlying market demand, our ability to compete effectively against imports put us in a very strong position for the months ahead. Moving to the next slide.
While we have discussed how market trends and trade defense are able to support our numbers, I want to focus now on what we are doing internally to improve the business. We officially launched the sixth edition of the Leadership Journey covering the years 2026 to 2028. This is our self-help program created to ensure that Aperam remains a leader in value creation in the industry and stays cash attractive even when the global cycle is at its lowest. This phase of the journey is built on three transformative pillars that touch every segment of our business. The first one, what we call One Aperam synergies pillar. We are building the most integrated value chain, capturing synergies in addition to the value of each business. I like to express it as one plus one equal to three. The second pillar is circularity, turning sustainability into tangible EBITDA.
The third pillar is innovation, moving up the value chain. Some of our products are already delivering functions to our customers. We are off to a strong start. In just the first three months of 2026, we have already achieved EUR 18 million in gains. To put that in perspective, our total goal for this three-year phase is EUR 150 million. Starting at this pace secures our structural growth early and provides a significant buffer against the geopolitical volatility we have discussed today. This immediate traction in Q1 2026 is possible thanks to tangible results delivered across all four of our business segments. The early wins were driven by a combination of strategic investment and operational discipline. In Recycling & Renewables, we realized the initial benefits from the footprint optimization and automation of scrapyards.
In Stainless and Electrical Brazil, we capture returns from hot strip mill investment alongside significant improvements in raw material efficiency. In Stainless and Electrical Europe, we executed on raw material optimization, rigorous cost management protocols, and benefited from mutual synergies with Recycling & Renewables. In Alloys & Specialties, we advanced the integration of Universal and unlocked critical upstream yield synergies in coordination with Stainless Europe. We are ramping up our innovation journey. Finally, in Services & Solutions, we realized scale-based gain through the continued rollout of automation and digitalization across our global footprint. In summary, the Leadership Journey is why we can be confident in our future. It is not just a cost-cutting program, it is a structural transformation. By extracting synergies, developing innovation, and leveraging on our circular footprint, we are ensuring that Aperam will be in the future a leaner, smarter, and more profitable version of ourselves.
Moving to the next slide. Today, I want to highlight two facets of our transformation from Q1, which are part of our Leadership Journey 6. Often we get asked about the potential of the Leadership Journey continuing as the next phase, and the answer lies in our focus on detail in realizing value in each of our businesses. What makes this project particularly exciting for shareholders is the immediate scale of their impact. These two initiatives are expected to lift our annual EBITDA by around EUR 10 million once fully operational by end of 2027. First, we are investing in the Timóteo cold rolling mill upgrade in Brazil. For a modest CapEx of EUR 10 million, we are revamping a key cold rolling bottleneck. This will provide a 5% increase in capacity, specifically targeted at the growing Brazilian market for high-quality stainless steel.
By mid-2027, this debottlenecking will ensure we can serve local demand more efficiently and capture additional value in one of our strongest geographies. Secondly, I am pleased to highlight the acquisition of Magnetec, which we just closed on April 1st. Magnetec is a specialist in nanocrystalline soft magnetic and inductive components. This technology is essential for electric vehicles, the energy, and the aerospace sectors. It was a strategic rescue acquisition from preliminary insolvency, allowing us to acquire high-value technology on a global footprint spanning Germany to China with a very low investment. It perfectly aligns with our strategy to move alloys downstream into high-value magnetic solutions, positioning us at the center of the electrification megatrend. With this acquisition, we are consolidating our operations in the area of magnetics across the world in a specific unit inside our Alloys & Specialties segment called Aperam Magnetic Components.
In summary, one project secures and expands our core capability and capacity in Stainless Brazil, and one pivots us towards the future of alloys as a magnetic player in electronics and EVs. Together, these projects alone represent a EUR 10 million step up in our EBITDA potential. This is how we transform Aperam, one high-value strategic brick at a time. Now I will hand over to Sud. He will give us some color about our transformation journey and the outlook for the second quarter.
Thank you, Nicolas. Moving to the next slide. Our financial results and self-help program provide the foundation of our plan forward, and our future growth is being supported by highly targeted, high impact investments, as Nicolas has explained. These are not just industrial upgrades. They are strategic moves designed to deepen our competitive mode. When we talk with analysts and investors, the conversation often centers on the EUR 200 million-EUR 300 million annual EBITDA European upside. This is a very important, and it is a massive opportunity driven by trade defense and European market recovery. This is only half the story.
That is why I want to also showcase the other half, the EUR 150 million structural uplift that we are building through hard and consistent work to serve markets such as Recycling & Renewables, electrical and electronics engineering, energy, magnetics, and aerospace across our global footprint. This EUR 150 million is not a hope. It is a result of the structural changes we are already demonstrating, as presented by Nicolas earlier. We've already decoupled a large portion of our earnings from the traditional European stainless steel cycle compared to a few years ago. We are growing our Alloys & Specialties and Recycling & Renewables segments regardless of the macro volatility in Europe. Our South American operations provide a high margin, stable base that acts as a powerhouse for the group while Europe stabilizes, and with additional investments, we also see a clear upside.
On top of that structural foundation, we got the European recovery with the new trade defense rules. As trade defense fully takes hold and the market returns to normalized levels, our Stainless Europe and Services & Solutions segments are positioned to capture an additional EUR 200 million-EUR 300 million. By optimizing our sourcing and operational synergies through the Leadership Journey, we ensure that we are able to benefit. In the past, our floor was much lower and much more vulnerable. Today, we are developing a business where EUR 700 million-EUR 800 million is our target until 2028. We are working consistently on the areas we control: cost focus, transformation projects, recycling expansion, and high-value alloys. Besides executing to benefit from being in the heart of Europe, we are also busy building the EUR 150 million structural bridge beyond.
Moving to the next slide, let's talk about where we are going. Last quarter, I made a promise. We targeted EUR 100 million quarterly run rate in H1 2026, but in two steps and as a ramp-up. Today, I can confirm that we are exactly on track. We have achieved EUR 90 million in Q1. We are moving into the second quarter. Our guidance for the adjusted EBITDA in Q2 is to be significantly higher than in Q1. As I've mentioned before, we intended to start the year with a steady pace and speed up. We are now entering that phase. Why are we so confident? The Brazil catalyst. We are moving into a period where Brazil returns with its full seasonal strength. The European dynamics.
We expect continued relief from imports, which directly correlates to higher capacity utilization at our European mills. We expect valuation gains. Last but not the least, the Leadership Journey 6 will add gains to EBITDA. Beyond the immediate next quarter, there is a case for further momentum. The trade defense factor. As we've discussed throughout this call, the new trade defense measures should be implemented as of 1st of July, 2026, and CBAM is in place already. We are seeing the factors play out already in Q2, and this should continue into H2. We focus on financial health. We expect a slight decrease in net financial debt in Q2, despite the typical working capital cycles. We also confirm the deleveraging target for this year, with net financial debt end of 2026 to be below that of 2025.
In a world where all the focus is on the difficulties of the current geopolitical climate, Aperam is focused on execution. As supply chains become increasingly localized, we've delivered a really good Q1, we are guiding for an even stronger Q2, and the strategic heavy lifting we are doing today is setting the stage for a clear path towards 2028. We started good, we are speeding up now, and we have the right roadmap to navigate the rest of 2026 and beyond. Thank you for your trust. Looking ahead, we will be available for meetings to explain what we are executing at Aperam and what the market conditions are. Starting soon, Nicolas, the investor relation team, and I will be hitting the road for a series of conferences and roadshows across Europe and the United States.
As the schedule on the slide indicates, we prioritize being physically present in as many locations as possible. We're eager to connect with you directly, so please reach out to our investor relations team for corporate access or to share your feedback. Let's shape the future of 2026 together. Thank you very much for listening to Aperam's Q1 management podcast. We wish you a pleasant day and look forward to your questions in our conference call this afternoon at 2:00 P.M. Central European Summer Time.